Assessing Risk and Vulnerability in Equity Release Clients

Equity Release has become an increasingly popular way for clients to release equity from their property, although, as we know, it is not without its risks.  However, we believe equity release is an effective and efficient way of enabling clients to enjoy their retirement or consolidate debts by releasing monies from their home

At Gilroy Steel Solicitors our role is to work closely with our clients to ensure they fully understand the implications of releasing equity.We consider our clients’ individual circumstances and take in to account any vulnerabilities that they may have which could impact them in their decision-making.

Understanding Equity Release Risks

Equity release products, such as lifetime mortgages, home reversion plans and RIO’s may have both financial and legal implications.  All clients should be aware of:

• Potential impact on inheritance: Releasing equity from their property may have an effect on the value of the estate thus reducing any sums left to their beneficiaries. 

• Future financial security: As part of the equity release journey, clients will need to understand how borrowing may affect their ability to fund later-life care or other expenses in the future. Consideration also needs to be given to life expectancy.

• Loan costs and interest: Lifetime mortgages accumulate compound interest therefore we advise clients to read the terms and conditions of their offer, ensuring they understand and are happy to proceed. The conditions of the offer are provided within our advice letter and are also confirmed at the home visit appointment with one of our Solicitors

• Benefits entitlement: Releasing equity may affect eligibility for means-tested benefits including pension credit or council tax support.

Identifying Client Vulnerability

The Financial Conduct Authority (FCA) and the Solicitors Regulation Authority (SRA) emphasise the need to identify and protect vulnerable clients. A person may be considered vulnerable due to:

• Cognitive Impairment: Conditions such as dementia or early memory loss could affect a client’s ability to make informed decisions. Throughout the transaction, we will assess the capacity of our clients in person and by telephone call.  If necessary, we can advise the client accordingly and ensure a Power of Attorney is in place to assist with making decisions and acting for the client should they lack mental capacity.

• Emotional or Psychological Pressure: Undue influence or coercion from family, friends or carers could lead to decisions that do not align with the client’s best interests. Our Solicitors will meet with clients on their own to ensure there is no undue influence, coercion or duress from any third parties. Any issues in this respect will be raised immediately for further assessment. We have previously acted for clients whereupon after meeting with them for the face to face appointment it has become apparent that they were being coerced and in such cases we have notified the financial adviser and have not proceeded with the equity release.

• Legal Understanding: At Gilroy Steel Solicitors, we ensure our clients fully understand the legal effects of taking out equity release by guiding and advising them throughout the legal journey. 

• Health or Life Expectancy:  A client’s health condition may influence whether equity release is the most suitable financial option. The financial adviser will ensure the best plan for the client, and we work closely together to achieve the best outcome.

Our Solicitor-Led Risk and Vulnerability Checks

As part of the transaction we conduct a thorough due diligence assessment for every client. Regular training is given to all our employees to assess a client’s vulnerability alongside our policies and procedures.  This includes:

1. Independent Legal Advice: Our Solicitors meet clients individually to ensure they fully understand the risks, benefits, and long-term consequences. All meetings take place in the comfort of the client’s home. Our Solicitor will guide them through all the documentation and can assist with any queries that may arise.
2. Capacity and Understanding: We assess whether the client has the mental capacity to make an informed decision and whether additional safeguards (such as a medical assessment) are needed. This can also result in the need for a Power of Attorney being appointed to act on behalf of the client.
3. Undue Influence Checks: Meetings are always held without family, friends or carers present to ensure the client is not under pressure or coercion. If, after our Solicitor has assessed, they feel for any reason the client is being pressured or coerced into the transaction, this is flagged immediately with the team to ensure the appropriate and necessary steps are taken to decide whether the transaction can continue.
4. Ongoing Compliance: We adhere to industry best practices and regulatory guidelines to ensure client protection at every stage of the process.

Conclusion

Equity release is a valuable financial tool when approached with careful guidance provided by the financial adviser and ourselves. We deliver a vital role in assessing risk and vulnerability, ensuring clients make informed and independent decisions which are suited to their individual needs

At Gilroy Steel Solicitors, we go the extra mile for all clients to ensure their journey is as streamlined and straightforward as possible, whilst making sure we guide them through to completion. We have an extremely approachable friendly team who are always available on the phone to assist with any queries or concerns the clients may have. At Gilroy Steel we have the people, processes, performance, price and the overall package.

We are proactive and passionate about what we do and believe this is reflected in both our service and feedback provided by our clients and advisers alike.